Disruptive change: Will it blow apart the AEC industry?

On Tuesday, I spent the day immersed in architecture, engineering, construction and technology at the Tech+ Expo in New York City. The event, sponsored by the Architects’ Newspaper and funded by several technology exhibitors, provided some insights into trends, and I’ll write a more comprehensive report for New York Construction Report and Design and Construction Report within the next day or two.

(We were secondary media sponsors, for which I received a pass to attend the event, though travel and accommodation costs were on my dime. No problem, because my wife enjoys NYC, and with a points ticket deal we could enjoy some fun time on our own before the conference.)

Perhaps the biggest “wow” moment occurred for me when Chris Meyer, Suffolk’s Chief Innovation Officer, displayed a graph showing the sudden market change for newspaper advertising. We’ve published a story about the multi-city contractor (based in Boston)’s Smart Lab concept, including its NYC branch, but I didn’t connect the dots until his speech that he had previously been the Boston Globe’s publisher.

This graph shows the incredible and sudden decline in newspaper advertising revenue correlated with Google and Facebook’s rise. See: https://charman-anderson.com/2016/09/28/us-newspapers-lost-advertising-revenue-found/

This chart posted by Kevin Charman-Anderson isn’t the exact one Meyer used, but it tells the same story. Newspaper advertising revenue peaked about the turn of the millennium, and then began a rapid and dramatic decline thanks to Google and, later Facebook, declining by about four/fifths in less than a decade — so advertising revenues are now even lower than they were in the 1950s. Newspaper digital sales have made the slightest gain; but the data is clear — the conventional newspaper industry has been pushed over the cliff, and in just a few years.

Meyer suggested that AEC, like the newspaper business, is an “intermediary” business — that is, most practitioners are serving others in the value chain rather than end users — and he suggested this could possibly create a situation where there will be major disruptions as new technologies capture a market presence and share. The obvious question: Could conventional AEC businesses face the same existential crisis as the newspaper (and other conventional media) businesses?

I’m not sure the threat is that imminent and real, in part because of the structural character of the AEC industry, the large and expensive capital requirements, the volume of regulation and control (especially at the local level) and the real challenges in finding effective, easy-to-implement integrated systems. As an example, Jeremy Munn, a senior capital project manager for the Design and Construction department within the Facilities Division of Northeastern University, described how the university is finally getting all the pieces together in a digital procurement/building cycle, but not by using a one-size fits all system and with plenty of training and support to encourage compliance (and this progress is coming because of the owner’s driving the agenda, not the architects, engineers or contractors.)

Yet we would be foolish to say what has happened to newspapers can’t happen to us, especially (as several speakers noted) the AEC sector’s technological adaptation is near the bottom of the graph in both usage and innovation. We need to be aware of how fast things can change when the right conditions exist.